People could be offered tax breaks to live and work in Wales in an attempt to boost the country’s underdeveloped economy.

Getty Images/AFP/Getty Images - Laura Edwards (3 R) and Sue Davies (2 R), girlfriend and mother of badminton player James Philips of Wales, hold the Welsh flag as they queue to enter Jawaharlal Nehru Stadium …more to attend the Commonwealth Games opening ceremony in New Delhi on October 3, 2010. The Games are due to open on the evening of October 3 with a glittering opening ceremony that organisers hope will erase memories of a shambolic run-up to the event. The Games, in which about 5,000 athletes will compete over 11 days of sport, have teetered on the brink of collapse in recent weeks over shabby accommodation, untested venues and a host of other health and security fears. AFP PHOTO / RAVEENDRAN (Photo credit should read RAVEENDRAN/AFP/Getty Images) less

The Treasury is considering giving the Welsh Assembly taxation powers that
enable them to vary the rates that apply to people in the country, allowing
them to cut or raise taxes to encourage investment and make the country more
competitive.

Andrew Davies, the leader of the Welsh Conservatives, will suggest in a speech
tomorrow that his party would use the devolved powers to cut tax for those
at the 40 per cent rate in order to boost the economy, according to The
Independent .

Currently the British Government spends £18bn more a year on Wales than it
gets back. Just one in 16 people earn enough to pay the higher tax bracket
of 40 per cent.

Mr Davies is expected to say that tax is an “important lever” for the
government and reducing taxation for those paying 40 per cent would “send
out a strong sign to business in competing regions of the UK, but it would
spell out that Wales is well and truly open for business".

The Government is currently considering the report by the Silk Commission
which recommended that some tax powers, including stamp duty and some income
tax responsibilities, should be devolved.

Tory party sources have said they are in favour of the move, echoing plans to
give more power to the Scottish Parliament which are due to come into effect
in 2016, it has been reported.

The source claimed that tax-raising powers would give Welsh politicians and
incentive to grow and promote their economy without feeling they had relied
on a hand-out from Westminster.

A spokesperson for the Treasury refused to comment on whether a decision had
been made either way.

An opinion poll carried out by the Silk Commission found that 64 per cent of
people living in Wales favoured income tax devolution, with 33 per cent
against, and they felt it would make politicians work harder for the
country.

There are 89,000 higher-rate payers seven per cent of all those in Wales
who are responsible for approximately 33 per cent of all income tax revenue
in the country, the HMRC estimates.

Only 4,000 people earn enough to pay the new 45 per cent tax rate.

The Silk Commission on devolution recommended in November last year that the
Welsh Assembly be given full powers over smaller levies, such as landfill
tax, stamp duty, business rates and aggregates levy, while Air Passenger
Duty should be devolved for long-haul flights initially.

It also said responsibility for income tax should be shared between Cardiff
Bay and Westminster, although corporation tax should not be devolved unless
that power is given to Scotland and Northern Ireland.

The report also made a number of recommendations in relation to borrowing
powers, including the Assembly being able to borrow to support key
infrastructure projects.

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